EBA on Extending Large Exposure Limits for French Systemic Banks
EBA published an opinion following the notification by the French macro-prudential authority, the Haut Conseil de Stabilité Financière (HCSF), of its intention to extend a measure introduced in 2018 on the use of Article 458(9) of the Capital Requirements Regulation (CRR) to safeguard institutions from excessive risk-taking and to prevent the buildup of future vulnerabilities. The measure intends to tighten, for French global or other systemically important institutions, the large-exposure limits applicable to large and highly indebted non-financial corporations resident in France or to groups of connected non-financial corporations assessed to be highly indebted and based in France. Based on the evidence submitted, EBA does not object to the extension of the proposed measure, which will be applied from July 01, 2020 to June 30, 2021.
With the application of this measure, French systemically important institutions will not incur an exposure exceeding 5% of their eligible capital for non-financial corporations or for groups of connected non-financial corporations assessed to be highly indebted. The 5% limit will act as a backstop to safeguard these institutions from excessive risk-taking and to prevent the buildup of future vulnerabilities. In the opinion, which is addressed to the European Council, EC, and the French Authorities, EBA acknowledges that the objective of limiting indebtedness levels of large and already indebted French non-financial corporations is appropriate with a view to promoting financial stability and preventing future systemic shocks to the French and EU economies. EBA encourages the French authorities to closely monitor the developments during the COVID-19 pandemic and to be ready to de-activate the measure promptly if it leads to unintended consequences. In light of this conclusion, EBA does not object to the extended deployment, by the HCSF, of the proposed macro-prudential measure, which will be applied from July 01, 2020 to June 31, 2021.
Related Links
Keywords: Europe, EU, France, Banking, Large Exposures, Credit Risk, CRR, Basel, HCSF Measure, G-SII, O-SII, EBA
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
DNB Extends Certain COVID Requirements to Less Significant EntitiesRelated Articles
PRA Finalizes Supervisory Approach for Non-Systemic Banks in UK
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.
EBA Finalizes Standards on Methods of Prudential Consolidation
EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).
EBA Updates List of Other Systemically Important Institutions in EU
EBA updated the list of other systemically important institutions (O-SIIs) in EU.
BCBS Report Concludes Basel Risk Categories Can Capture Climate Risks
BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.
UK Authorities Welcome FSB Review of their Remuneration Regime
UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.
PRA and FCA Letter on Addressing Risks from Use of Deposit Aggregators
PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.
MFSA to Amend Banking Act and Rules in Coming Months to Transpose CRD5
MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.
EC Delegated Regulation on Specialized Lending Exposures Under CRR
EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.
OSFI Proposes to Enhance Assurance Expectations for Basel Returns
OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.
ECB Issues Results of Benchmarking Analysis of Recovery Plans of Banks
ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.